Time for a wage rise, says US giant

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The chief executive of Wal-Mart, Lee Scott, says images of the
poor of New Orleans stuck on rooftops and balconies caused him to
rethink the way his company, the largest retailer in the world,
does business.

Wal-Mart is legendary for squeezing every last cent out of its
business. It is notorious for its labour practices, particularly
its dislike of unions. So it was surprising to hear its chief
executive announce that it would like to see the minimum wage in
the United States increased - those people on minimum wages are
also Wal-Mart customers.

Scott said: "The US minimum wage of $US5.15 ($6.80) an hour has
not been raised in nearly a decade and we believe it is out of date
with the times.

"We can see firsthand at Wal-Mart how many of our customers are
struggling to get by. Our customers simply don't have the money to
buy basic necessities between pay cheques.

"While it is unusual for us to take a public position on a
public policy issue of this kind, we simply believe it is time for
Congress to take a responsible look at the minimum wage and other
legislation that may help working families."

The minimum wage in the US is set by Congress and thus subject
to the whims of politics.

The US Government defines poverty as a family with one adult and
three children living on less than $US19,223, the equivalent of
$US9.24 an hour. On these figures, 12.5 per cent of the population
was living in poverty in 2003.

Wal-Mart faces constant criticism about its labour practices,
but the company says it pays above the minimum wage. Not much
above. When David Shipler was researching The Working Poor:
Invisible in America he went to a Wal-Mart store in New
Hampshire which paid $US6.25 an hour and up, with an extra dollar
for working at night and another 25 cents for working at the cash
register.

A report by the Economic Policy Institute, The State of
Working America 2004-05, found that not only did unionised
workers earn higher wages, they were 28.2 per cent more likely to
be covered by employer-provided health insurance, a critical
employee benefit in the US.

Shipler says unions have all but disappeared from the private
sector. While one-third of government workers belong, less than 8
per cent of private-sector employees do. Companies have been
declaring bankruptcy then voiding union agreements, forcing big
wage and benefits cuts.

The US is going through the painful task of restructuring its
economy, just as Australia did 15 years ago. One difference is the
large pool of unskilled labour provided by the millions of illegal
workers. Shipler says these people are most vulnerable. They lack
bargaining power, often face language difficulties and sometimes
don't know their legal rights.

In 2002, income per head in the United States was greater than
in any other developed economy, but it also had the greatest gap
between rich and poor. The Economic Policy Institute says:
"Inequality has been and continues to be a mainstay of the US
economic model."

Proponents of the American model argue that it gives jobs to
people who would otherwise be unemployed, and produces a more
dynamic economy. They argue that people move easily up the income
scale.

Congressional Budget Office economists Ralph Smith and Bruce
Vavrichek found that 63 per cent of minimum-wage workers increased
their wage within a year. Professor James Long of Auburn University
found that the average wage increase within a year was 30.6 per
cent.

But the Economic Policy Institute found that the percentage of
people who were "always poor" was 9.5 per cent, the highest for any
OECD country.